The financial markets are in a state of flux. Wall Street indices are all trading at record levels, but an ominous sign is in the offing with the USD recently pairing gains. The reason for this is a loss in consumer confidence. Of course, the Trump White House is seriously considering overhauling the US tax system so that businesses can enjoy lower taxes in the region of 15% – 20% to help boost economic growth. US consumers meanwhile are showing less enthusiasm about their expectations given the current economic climate. The consumer confidence report was one of the few negatives to emerge in a pool of rising investment sentiment in the US.
The Trump administration has faced significant hurdles from the courts vis-à-vis its immigration ban on 7 predominantly Muslim countries. That Trump has been stopped dead in his tracks will help to re-focus attention on the economy. As always, Trump’s bluster is being met with skepticism. With fiscal policy stimulus expected in 2017, traders are going long on the USD in the expectation that the Fed will support a stronger USD with rate hikes. Recall that the Fed is pushing for 3 rate hikes to the Federal Funds Rate (FFR) this year.
Trading on Trump – A Volatile Bet
Financial markets are enduring the same hardships that President Trump is going through during his on-the-job learning curve. Trump has been sharply critical of China for quite some time. However, in a recent conversation with the leader of China, Xi Jinping, he agreed to support a One China policy. This comes amid growing tensions between the White House and Beijing after Trump congratulated the leader of Taiwan recently. That the One China policy will be acknowledged is a major diplomatic coup for China, and one that will lay the groundwork for improved relations between the world’s #1 and #2 biggest economies. For its part, Taiwan has no interest in angering China, or the US, and it will carefully weigh its options moving forward. Now it appears that relations with China will stabilize and trading activity will be less volatile.
Upcoming Market Events and How to Profit
The Japanese Prime Minister will be visiting Washington DC, to discuss massive infrastructure investment plans with the White House. Additionally, one of the world’s major ratings agencies, Moody’s, will soon post credit ratings for Italy and France. Also in Europe, Greek creditors will be pushing for greater austerity measures to be implemented in the beleaguered European country. Recently the German Finance Minister stated that the Greek economy would collapse without IMF support. Perhaps the most important economic announcement will be taking place this weekend when the IEA meets with OPEC to discuss the oil cartel’s supply cuts. Presently, the oil price is $53.97 per barrel for WTI crude oil and $56.68 per barrel for Brent crude oil. Oil has been rising sharply since OPEC announced its production cuts on November 30, 2016.
For those traders who are looking to profit off these market activities, there are conventional methods such as futures trading, traditional stocks and CFD trading. For those asking the question: What is CFD trading, the answer is simple. CFDs are contracts for difference on a tradable instrument that tracks the movement of the underlying asset. For example, the 2 parties in a CFD trade will exchange the difference between the opening price/closing price of the contract. This is a derivative product, and hugely popular in the United Kingdom and across Europe. It’s a great way to hedge your financial portfolio by going short (selling) or going long (buying) against losses with physical investments. For example, if your gold stocks are decreasing in value, you could take a short sell position on your gold CFD trade and balance it out. With Trump in the White House, volatility is assured, and this is the perfect opportunity to trade commodities, indices, currencies, and stocks with these derivative products.